China controls a disturbing amount of the rare earth minerals vital for high tech manufacturing, the defense industry and many other industrial uses. They have been on an extended effort to corner this market for decades and now are threatening to use this as a weapon in in the current trade war.
The U.S. shouldn’t underestimate China’s ability to fight the trade war, the People’s Daily said in an editorial Wednesday that used some historically significant language on the weight of China’s intent.
The newspaper’s commentary included a rare Chinese phrase that means “don’t say I didn’t warn you.” The specific wording was used by the paper in 1962 before China went to war with India, and “those familiar with Chinese diplomatic language know the weight of this phrase,” .
China has been making trade deals and offering loans tied to development in many countries in Africa and elsewhere that have strategic resources. They structure the deals to try to force the countries into disadvantageous positions that lead to more concessions to the Chinese. The deals aren’t always in the country’s best interests but are very lucrative for corrupt leaders.
Today, some see China as a neocolonial power eager to plunge African nations into debt, stripping their resources and their sovereignty. They point to cases such as Djibouti, where China owns about 80 percent of its public debt, which, in turn, has exceeded 86 percent of GDP, or Zambia, where some reports suggest unsustainable lending will soon lead to a Chinese takeover of the public electric company, ZESCO.
Many of these deals have provided both access to resources and a strategic tool to use against the US and anyone else who seeks to challenge them economically. This has been looming for some time and it is unsurprising these threats are coming out now. President Trump has shown he is willing to accept more short term pain to the US than the Chinese expected. This is leading them to bring out their more potent trade weapons.
There were many who did not want the President to go down this path, but the alternative was to allow China to act unfairly and benefit extensively. Of course there is a risk and pain to US companies affected by the tariffs. But we run the risk of letting the imbalanced and improper situation become a permanent fixture if we do nothing.
We also need to consider how to counter the Chinese imperial approach to global resources and trade. As our Sr VP Brad Patty pointed out the Chinese have a plan and they are working it.
The most notable of these are the “One Belt, One Road” project, although it has become better known as the “New Silk Road.” They are planning to devote $900 Billion to infrastructure improvements that will enable Chinese trading, thus allowing themselves and their partners to both gain in wealth. China expects to further its political ties at the same time and in the same way.
US policy has been decidedly to avoid anything that even looks like imperial control or domination and we have relied on the principles of fair trade to ensure we have access to the both raw materials and markets.The Chinese harbor no such self-limitations and now we are seeing the result. We may lose access to vital resources necessary to build and operate our modern country. SSG’s suggested Grand Strategy of Freedom and Fair Trade offers a look at how to do this in a moral way consistent with US principles.
This does not mean we should adopt the Chinese mode and start building vassal states by making corrupt deals. But it does mean we need to better counter their burgeoning control of global resources and we should not shy away from holding them accountable for malign trade practices.
It’s short term pain now to avoid inevitable damage in the easily foreseeable future.